Tesla logs third straight record quarterly profit, optimistic on growth

Brian Sozzi, Julie Hyman, and Brian Cheung break down Tesla’s Q3 earnings, which saw the company top profit estimates on a record-breaking wave of deliveries despite a continued presence in supply chain disruptions.

Video transcript

- We start, of course, with Tesla and what we got from that company ninth straight quarter of profit for Tesla. Revenue up 57%, $13.8 billion. That was just shy of what analysts had been predicting, but the adjusted earnings per share coming in well above what analysts had been predicting here. And really you have to consider as you look at the reaction here this morning, you guys in the Tesla shares, which have been pulling back, you have to consider that we have seen that 50% surge from the lows in Tesla. So this is a phenomenon Brian Sozzi that we've been seeing a little bit thus far where if expectations are running really hot into a report, we've seen a little bit of disappointment in some cases in this young earnings season when the numbers actually come out.

- And know plunges, but you know that is, that's a positive spin. I'm going to keep it positive here on Tesla. I've been critical of Tesla through the years, but I think those that have come out bearish this morning are out there trading the stock to the downside for whatever reason because of a revenue miss in the quarter really is missing the bigger point here. And I'm just got a good note from Adam Jonas over at Morgan Stanley noting that despite rising just higher inflation, component shortages, you have Tesla approaching annualized operating profits on an adjusted basis of $13 billion. That's now taking the company into the territory of Ford and General Motors on a fraction of the revenues.

I look at some notes, other notes. Deutsche Bank calling attention to this company is now producing the highest gross margins and operating margins in its history. And about 9:00 o'clock last night I had nothing else to do, so I tweeted the past 15 quarters of gross margins for Tesla because I have nothing else to do except do that and tweet that out. And you can see a clear upward trajectory in the profit margins of Tesla here. Bottom line they're doing a good job squeezing more profits out per vehicle and that should be commended for Tesla here. And I think the sell off we're seeing in the early going it looks a little misguided to me.

- You know, as they say when your board just tweet through it, but I mean, I think to your earlier point Julie, you're absolutely right. I mean, this is really all about expectations. I think that's why you're seeing the stock down, despite the fact that it was a record quarter 241,300 deliveries in the quarter most of that in the Model 3 and the Model Y. But CFRA kind of summarizing really that they noted the reaction in the shares post-release was muted because, ''expectations for a beat relative to consensus was priced in.'' And a lot of that is because of the rocket up that we've already seen in the stock ahead of these earnings.

So I think it's interesting, though some of these risk factors may also be weighing on the stock. We saw in the press, in the press release when they posted these earnings after the bell yesterday. They said, ''While sequential growth remains our goal, the magnitude of growth will be determined largely by outside factors.'' So seems like just the big macro picture at hand has really surrendered a lot of the control in the company's ability to deal with some of these supply chain issues. But really how much of a story is that idiosyncratic to tesla? We know that this is a story across every company, across every industry, which I think maybe absolves Tesla of a more harsh stock reaction because of saying something like that. So I think broadly speaking, it was a good quarter for Tesla. We'll see if they can keep the momentum especially with that focus on China in the quarters to come.

- You know one of the things that Brian Sozzi tweeted about in reaction to this report has to do with the automotive gross margins for Tesla, which came in North of 28%, which is the envy of the other automakers, right? But one of the other questions, and one of the other reasons potentially why the shares are a little bit weaker today is that a lot of analysts are saying could this be peak margins for the likes of Tesla in part because some of those cost issues that you're talking about that are affecting the automotive industry and beyond? And so that also might be you know we keep talking about potential peak profit margins not just for Tesla, but about a lot of different companies. And so here is definitely an example where that appears to be a concern source on the part of investors.

- Yeah look, they have a lot of things, things ramping up over the next four months. A lot of new production, they're going to try to get the cybertruck out at some point next year. So to your point, yes, that could be a component here on why Tesla shares are taking a profit. But just to let everyone know out there. It's not just all numbers in stock prices here. You know we do like to have a little fun here and to that end on the conference call for Tesla, there was no Elon Musk. He said in the second quarter that was his probably his last earnings call for the time being unless he has something very important to talk about. And frankly I thought the earnings call was quite boring, very standard like, and kind of put me to sleep a little bit. And then last but not least, Wedbush Dan Ives out with the bull case of $1,500 a share on Tesla here this morning, very aggressive.

My friend Jim Cramer retweeted my tweet this morning really kind of poking fun at it here. And I wouldn't be shocked if you do see some more very maybe too aggressive price targets on Tesla coming out after this quarter, $1,500. I mean, that's that's almost double here guys. Actually, Yeah, almost double.

- And then one final point worth mentioning, we cannot forget about the balance sheet implications of Bitcoin. For Tesla they actually recorded a Bitcoin related impairment of $51 million in the third quarter again, not necessarily substantial, but notable still. That was because of obviously the volatility in Bitcoin prices in the third quarter. We know what's been going on with Bitcoin over the last 24 hours, but worth mentioning there because apparently that is now also a risk factor for companies in 2021 Julie.

- Well, a few companies anyway the ones that have it. Remember back in February is when Tesla said it had taken a $1.5 billion stake in Bitcoin. And then apparently remember Musk had that sort of I don't know realization moment where he said Oh, maybe Bitcoin mining isn't so great for the environment, and said he was going to wind down some of the holdings. They sold 10% of that stake in April. And so now it looks like at the end of the latest quarter, $1.26 billion was the value of the stake both because of that 10% cut and because of the changes in Bitcoin value. But obviously as we know, Bitcoin has been going up since then.